As intraday traders it’s easy to be blinded by viewpoints that are based upon timeframes that are irrelevant to the needs in the current session. It’s just as easy in hindsight to say “trust your analysis” or “trust your plan”. What does this really mean with regard to the activity that is present?
A directional price move must be met with volume, “interest”. Therefore, when price does in fact move, and builds volume (interest), the activity described needs to be respected until it changes. Instead of providing philosophical means of price and volume activity that are not able to be executed upon, let’s dive deeper.
I’ve stated the following via twitter:
From here, let’s build a framework:
Is volume building and creating a high-volume node?
Is price staying within the high-volume node of the current build?
If price escapes, what does that mean?
How can this information be utilized in a live trading environment?
The initial tweet says, “If you draw a volume profile on the dominant leg of price action and the volume continues building nodes (high volume areas of interest), ‘she ain’t done’.”
What is meant by this is that the price range around the High-Volume Node (HVN) is temporarily becoming accepted, as long as the activity remains within the boundaries of that distribution. So, what are the boundaries of that distribution? That would be the low volume areas (Low Volume Nodes ‘LVNs’) surrounding the volume build. Therefore, unless initiative activity breaches the LVN from the distribution, a structural reference has been provided for rebid/reoffer activity.
Drawing a volume profile from the dominant leg is based upon the timeframe of interest. For instance, within the intraday activity, the auction may change hands multiple times (think TPO [30 minute high and low]).
One Time Framing is a concept within TPO (Time Price Opportunity [30 minute]) charting used to describe the direction of the market's trend.
In a One Time Framing uptrend, the market forms a series of higher highs and higher lows, without any significant pullbacks or reversals. This indicates that the market is consistently making new highs and that the bullish trend is strong and sustained. (This is an example of an auction leg up)
Similarly, in a One Time Framing downtrend, the market forms a series of lower lows and lower highs, without any significant rallies or reversals. This indicates that the market is consistently making new lows and that the bearish trend is strong and sustained. (This is an example of an auction leg down)
The concept of One Time Framing can be useful with respect to strength of the move as well as a change of hands in the auction. Traversing a prior period low/high can be significant when utilized in conjunction with the volume profile and also provide context clues in an execution sense.
By no longer respecting LVNs behind the direction of a particular trend, the auction has begun to seek a temporary balance by which a trader can then begin to utilize the session’s structure at hand to gauge an ideal entry location as well as risk management. In this situation, leaving a volume build (HVN) and initiating against the direction of the trend by traversing the most significant LVNs that lead into the move allow for intraday traders to then assess a reversion entry upon a retest of the LVNs traversed.
As the referenced tweet says “Say you have a node and the auction returns above (or below based upon the direction of the auction leg) the LVN into consolidation. The LVN now turns into a key inflection.” Therefore respecting the LVN means the leg is done, at least for now.
For basics of this understanding, I’d like you to check out two simple explanations via: